Issues weigheing down indian economy

ISSUES WEIGHING DOWN INDIAN ECONOMY
Abstract
The article revolves around issues which are decelerating growth of India. Growth of an
economy is a lateral concept, the new mantra for comprehensive growth lies with the
development of the citizen. Only infrastructural development is a waste if we do not project
and eye for sustainable growth. There are issued which India is presently experiencing friction
with. The issues discussed in this article are common yet with considerable weightage which
contribute in nation building. Tweaking these very issues, shall overhaul India’s mission for
being a developed nation. As Prime Ministerial candidate Mr Narendra Modi quoted , “ 3
driving forces of India are its Democracy, Demography & Demand.” which if harnessed in the
right direction will act as a catalyst for our economy as a whole.
Objectives
1. To illustrate issues, weighing down Indian economy.
2. To analyse factors contributing in decelerating of Indian economy.
3. To imbibe the sense of responsibility in each Indian to work collectively for India
Development.
Introduction
In today's world where massive bi polar tensions have taken a back seat while other tensions
have crept up, consequently negating the big problems with prevailing problems. The same
is prevailing in developing economies throughout and is impacting the modus operendi of the
economies; as a result, countries are reaching out for sustainable and long term solutions or
new economic reforms. The very realization and implementation of India’s economic reforms
in 1991 were initiated due to two external factors.
1. Collapse of Soviet Union and its economy, whose central planning was the model of
India’s development
2. Superlative success of China after they liberalized and opened their economy.
This is true for countries in Africa, Europe, Australia, North and South America, Asia including
India. As we liberalized, globalized and Privatized in early 1991 it made countries shrunk into
small cocoons. Impact on one country is easily reflected onto the other set of countries as well.
In today's world there is no one counterpart, but groups of counterparts to compete with.
Henceforth we often say India versus Rest of the World and resist ourselves from narrowing
down to one particular counterpart. Prior a decade or so, many Asian countries were almost at
par with India, but 15 years down the line the change in other countries is substantial and
tangible and such a change has brought competitiveness in our economy.

As per the latest statistics issued by Central Statistical Office (CSO) the projected growth is
pegged at 5 percent while Apex bank (Reserve Bank of India) forecasted Indian economy to
grow at a rate of 5.5 percent and whatever may be the actual figure it shall be lower than what
India is actually capable of. As Mr Palaniappan Chidambaram cited in his union budget 2013,
that global growth has dropped down by 0.7 percent to 3.2 in 2012. As India is not working in
seclusion with the global economies, the aftershocks should be absorbed.
Our finance minister elucidated on the mool mantra; inclusive and sustainable growth should be
the vision to attain growth rate of 8+. County is from people and not vice versa. Growth of
people will ultimately cause country to grow and take rapid strides. By tweaking human
development index a lot can be done.
"The kind of world that we are moving into is essentially a world in which it will not be possible
for a country to reach its full economic potential if it is not able to compete globally with others
in the same position."
- Mr Montek Singh Ahluwalia, Deputy Chairman, Planning Commision,Republic
Of India
There are two sets of people in India; firstly self-proclaimed clever politicians and officials and
secondly the powerful common man .The economy stands in between command given by the so
called clever politicians and services sought by the powerful common man which gives strong
implications that the system cannot be revived by self-proclaimed powerful politicians but the
terms shall be dictated by the strong common man of India.

Issues Weighing down Indian Economy
Importantly we as an emerging economy have to strive and compete against rest of the world
where they are now .We need to work continuously and proactively to come at par or even
eclipse rest of the world. It is time to change and change collectively not in isolation. As prime
minister has no magic wand to turn up the scenario in days' time, it will take its due course.
The need of the hour is that we have to compare ourselves from rest of the world that means it's
time to transform ourselves from good to best. This inevitably means producers, intermediaries,
telecommunication infrastructure; core infrastructure has to come up with quality standards to
achieve quality production, timely delivery, and competitive prices.
Moving on to the core of the article I would like to elucidate issues weighing down Indian
economy and how can we resolve the same
Financial Discipline
Three major components of financial discipline are balance of payments, prevailing interest
rates, and fiscal deficit. These three are the litmus test for any economy to check whether they
are heading in the right direction or not. As it is said, "It is not the speed but direction which
makes you reaches your destination safe and sound and a ship without direction is a rudderless
ship." The common perception of a common man is to increase public utility expenditure in
order to bring in change in an economy, but the million dollar question is, what are the sources
available for generating revenues to spend thereafter?
The three options for an economy are to generate funds via foreign institutional investments,
foreign direct investments or interest bearing external commercial borrowing. And as per facts,
quantum of deficits are surging hence best available option to generate funds is via Foreign
institutional investors , foreign direct investment which will not only allow Indian economy
to strengthen itself financially but technologically as well and same should be done
democratically. Also it is high time to introduce conducive tax system which not only should
increase government's piggy bank but should widen the tax ambit so that more and more of
Indian citizens can contribute in Nation building. Which demands not only bringing in such
new reforms but implementation is the crux. Unless and until we'll work upon the reforms they
will remain in forms.
As a rule of thumb in economics, government expenditure increases aggregate demand which
brings with itself both positives and negatives. The prudence lies in creating an optimal level of
government expenditure.

Financial Sector
India: Inflation Rate
As the proverb goes, in Indian economy, financial sector is mother of all economic reforms.
The pivotal and the most important area for an economy to function smoothly without hiccups.
One thing to boast of ,is about Indian financial system where major banks around the world
were scaling down like pack of cards, Indian banking system stood firm and strong and
witnessed all economic breakdowns around the globe and learnt a lot and took positives in
stride. Banks should be injected with more funds and let loose so as to work autonomously to
attain economic stability. The change is already in course and benefits shall be visible in half a
decade from now on.
Financial Inclusion
The very basic feature of an economy to develop is how the individuals are utilising their hard
earned income, whether constructively or destructively. Financial inclusion in India will
provide that much required impetus to our fellow citizens from rural India to get in habit of
saving and inculcate habit of utilising banking system. Grameen bank an initiative by noble
prize winner; Mr Mohammad Yunus, is an outstanding model of and for financial inclusion,
same can be incorporated by customising according to the needs of the citizens and help them
get along with banking sector.
The correlation between financial inclusion and economic growth has been long recognised:
low financial inclusion impedes economic growth. Access to easy and affordable mainstream
financial services by disadvantaged social groups is acknowledged as a key criterion for poverty
alleviation and reducing social inequality. Such unfettered access enables the financially
excluded population to build savings, carry out investments, avail safe and low-cost credit and
more importantly it enables the poor to mitigate risks of income seasonality, illness and
employment loss.
10.79 10.91
10.39
9.39 9.31 9.31
9.87
9.64 9.52
9.84
10.17
11.16
8
8.5
9
9.5
10
10.5
11
11.5
Jan-13 Feb-13 Mar-13 Apr-13 May-13 Jun-13 Jul-13 Aug-13 Sep-13 Oct-13 Nov-13 Dec-13
Inflation Rate

Resource Utilization
Coal Consumption Gold Consumption
Oil Consumption
The major factors of high fiscal deficit are our dependence on gold, oil and coal. We need to
curb down on the demand of these three commodities. As consumption is more than the
demand hence more quantum is imported at high rates consequently creating adverse effects
on fiscal deficit. Which if not controlled will erode country's foreign exchange reserves.
One of the basic prerequisites of bringing in change is use of available resources effectively
and efficiently. The very fact that India is blessed with its demography which is still unutilized
to its full capacity. Himalayan region in North West is the source of hydro energy, Southern
region is rich in wind energy and Western and Northern region are solar energy powerhouses.
The same natural resources are underutilized which if put to judicious use can do wonders for
India’s resource utilization. The establishments which will adhere to the rule will prosper
indeed and left outs shall be directed to do well or dissolve.it is high time we stop nurturing
non performing sectors which as a result creates mammoth overdrafts on the government.
Other noted concern is over protection of Indian industries. No doubt we have shed out fortified
walls and allowed foreign players to compete with the existing industries but the major
problem child is, did we create level playing field for our industries, in order to compete with
much modern establishments from abroad.in order to supersede.
87% 84% 81% 79%
13% 16% 19% 21%
0%
20%
40%
60%
80%
100%
120%
2010 2011 2012 2013
Domestic Imports
153
108.9
150.7
68
0
50
100
150
200
Jwellery Investment
2012 2013
0
20
40
60
80
100
120
2008 2010 2012
Price in $ Consumption in Barrels

It’s time we work upon creating level playing field for our domestic industry and then expose
them with the industries across borders and this ought to be done in chronological manner to
reap maximum out of limited resources. Also government's initiative of Aadhar is a welcome
step. Government should speed up registrations and should use the data to benefit the people via
direct cash transfers.
Tethered Anti- Corruption Bill
The more you tell the less it is. Black money, scams, tax evasions, embezzling people's money
is what adds to the woes of Indian economy and can be said dwindling Indian economy.
Refraining from pointing towards any individual or group of individuals, it is time of self-
introspection. Multi trillion crores of black money is parked in tax heaven countries, which as
a result is denting our economy. Lokpal bill was rolled in which was smelling dust for more
than past 4 decades and which is fragile as a glass. It is time to do the due by making anti-
corruption bill tethered enough so as to engulf any misdeed irrespective of his/her class,
position, status.
Over Ambitious Schemes of Government of India
Populist movements of Government of India vis a vis MNREGA (earlier known as NREGA) ,
,Right to Information Act, Right to Education Act, Aadhar Scheme, Food Security Bill, to my
opinion have just dented the exchequer rather than contributing to the individual’s development.
Mahatma Gandhi National Rural Employment Guarantee Act promised 100 days of
employment but last fiscal year only 37 days of work was provided and to dismay very less
people approached court to bring up this to the notice of the authorities in charge. To add to the
woes, marginal or very less quantum of assets have been created which was the very essence
of MNREGA.
Expenditure on MNREGA
40,100 40,000
33,000 33,000
40,100
29,213 29,387
0
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
45,000
2010-11 2011-12 2012-13 2013-14
Expenditure on MNREGA in crores
Budgeted Spent

Status of RTI act is worse than MNREGA, where more RTI activists got killed and there is
hardly any advocacy of RTI act. Another rosy scheme of Right to Education where children of
age group of 6-14 years will be provided free education back fired. According to the agency
reports children are learning less after RTE got implemented. Food Security Bill which talked
about proving subsidized food to 67% of ever growing Indian Population double pressurize the
exchequer when it is a proven fact that agricultural output in India is dependent on its erratic
monsoon. The schemes may have developmental vision and mission but same are in doldrums
as system they are functioning in are corrupt and ineffective.
Expenditure on RTE
India has moved on to a higher growth trajectory. To sustain and accelerate the growth
momentum, we have to ensure increased participation of the economically weak segments of
population in the process of economic growth. Inclusive growth of hitherto excluded segments
of population is a critical part of this process of holistic development. Measures, if
implemented, will accelerate the process of financial inclusion. Deliberations on the subject of
financial growth contributed to a consensus that merely having a bank account may not be a
good indicator of development. Further, indebtedness as quantified in the NSSO 59th round
(2003) may not also be a reflective indicator. The ideal definition should look at people who
want to access financial services but are denied the same. If genuine claimants for credit and
financial services are denied the same, then that is a case of exclusion.
Level of indebtness in the country
17,202 20,842 21,330
24,532
0
5,000
10,000
15,000
20,000
25,000
30,000
2010-11 2011-12 2012-13 2013-14
Expenditure on Sarva Siksha Abhiyan in crores
0
20
40
60
80
100
120
% Indebted HH % Non Indebted % Indebted to formal
sources
% Excluded by formal
sources
NR NER ER
CR WR SR
UT INDIA NE,E,C

Sustained Economic Growth
India Population
Unemployment rate in India
It is not only growth, but sustainable growth which we should aim at. Growth which will enable
present generation to reap the benefits along with future generations to enjoy the sustainable
growth. Mr Thorsten Veblen coined the words "conspicuous consumption" in his book "the theory
of leisure class". The basis on which good repute in any highly organised industrial community
ultimately rests is pecuniary strength, and means of showing pecuniary strengths and so of
gaining or retaining a good name are leisure and conspicuous consumption of goods. -
Thorsten Veblen, 1899
Green Revolution II
India: Agricultural output
1166.23
1186
1202
1217
1140 1150 1160 1170 1180 1190 1200 1210 1220 1230
Jan-10
Jan-11
Jan-12
Jan-13
India Population (million people) Linear (India Population (million people))
9.4 9.4
3.8
0
5
10
Jan-10 Jan-11 Jan-12
Umemployment rate
Umemployment rate
234.47
218.11
244.49
259.29 255.36
180
200
220
240
260
280
2008-09 2009-10 2010-11 2011-12 2012-13
Agricultural out put in million tonnes

India strongly waits for its second green revolution. Feeding hands are less than mouths to feed
which consequently brings in notorious inflation into play which creates major road blocks for
an economy to grow. With a pleasantly deadly combination of or hard working farmers and
dexterous scientists we shall achieve green revolution II in next 5 year plan.
Poverty Eradication
Poverty plays a major role in dwindling of an economy. It is a vicious circle where in poor
think that more the working hands more the income as a result birth rate goes high and
resources being limited, proper allocation becomes next to impossible which as a result adds to
woes of population increase resulting to high unemployment rate further resulting to low
utilization of resources which subsequently leads to unemployed youth to indulge in anti- social
activities which as a result destroys economy and does no good. Hence poverty is a multi-
pronged malice which brings along with itself multiple demons which work in coordination in
dismantling the whole economic system prevailing in a country.
Also destroying livelihoods and displacement of poor in the name of industrialization, big dams
for power generation and irrigation, corporatisation of agriculture despite farmer's committing
suicides and modernization and beautification of our cities by demolishing slums are adding fuel
to the fire of poverty.
- Amit Bhaduri, article in Economic and Political weekly, 2007
Political Structure
Political Sentiment, 2014
India's political structure is federal to some extent. There are noted examples of policy
devolution. Indian political system lacks decision making vision which is so important to
succeed. Coalition forces keeps no stone unturned in pressurising government i n power to act
according to their will and keep nation's interest at stake. birth rate is surging, industry needs
to grow, grow rapidly, power infrastructure is not up to the mark, people need
industrialization and jobs and when comes to setting up to kundakulum nuclear power plant,
then local political parties act to safe guard their own vote banks pushing India as a whole in a
jeopardy .
Prime Minister Manmohan Singh has realized the need for reform but points out that it is unlikely
that congress president, country's most powerful politician agrees.
209
153
181
BJP + Congress + Others

I strongly believe political structure plays major role in country's development and would like
to suggest our efficient election commission to advocate two party system. There is strong
absence of coherent, coordinated, determined behaviour at the top.
Nurturing Micro, Small & Medium Enterprises
Indian economy vastly depends on MSMEs as they contribute major chunk in employment
opportunities, exports and production to be consumed domestically. Government should boost
these MSMEs in order to contribute more to the economy by offering them both tax and non-
tax benefits. A welcome step initiated by finance minister is passing of factoring act 2011 which
will provide a corpus of Rs 500 crore to Small Industries Development bank of India to provide
credit assistance for factoring.
Setting up of Special Economic Zones
India Exports India Imports
Global competitiveness report identified poor infrastructural facility as the main reason for
industry's bad performance. To combat this problem concept of SEZ was brought in and special
economic zone act 2005 was enacted. SEZs provide much required impetus to the industry by
introducing tax exemptions and cutting down manufacturing costs considerably along with
prerequisites to build residential complexes, malls, recreational centres to cater to the needs of
the workforce, but lot has to be done. SEZ concept is new and and is not promoted on a
widespread basis this is evident from the fact that in India only few selected cities have SEZs
where as in china whole province is bestowed upon with the status of special economic zones.
A noted example of mismatch of policies is what happened at Singur, West Bengal where Tata
motors limited was ousted by the local farmers and political power just to strengthen the vote
bank.
Ever increasing budget on Defence
Though the issue is political but very much in sync with Indian economy. Major
investment/expenditure is done to safe guard Kashmir from infiltration from across border. The
major hurdle in development of any economy is disruption in peace and tranquillity among the
citizens and foreign powers are working to keep dismantling the peace and tranquillity of the
northern state of India.
25775.19
26259.36
30849.65
24164.37
24505.66
23785.64
25834.46
26135.94
27679.33
27270.97
24613.29
26366.06
0 10000 20000 30000 40000
Jan-13
Mar-13
May-13
Jul-13
Sep-13
Nov-13
India Exports in USD millions
44754.7
41181.7
41164.7
41951.7
44649.3
36034.7
38102.6
37053.9
34439.5
37827
33833.2
36486.3
0 10000 20000 30000 40000 50000
Jan-13
Mar-13
May-13
Jul-13
Sep-13
Nov-13
India Imports in USD Million

As we keep on increasing our budget on defence and minimal increase in budget for rural
upliftment and education brings a big surprise. It is high time we resolve this issue and on
personal front. I strongly believe once this issue get resolved it will act as a catalyst in
development of India as a whole.
Learning from & Taming the Dragon
India should also work proactively to tame the ever increasing dragon (China). Being the most
populous country of the world India should take a leap or two from thy neighbour. Not only
tame the dragon but use its positives so as to extend positives to the citizens of India. China's
infrastructure is 20 years ahead of India and the same can be studied and applied here as well.
Criticism leads to no man's land and imbibing the positives will only do good so it's time we tame
the dragon and learn from dragon.
BoP Position as on 31 March 2013
Current Account and Capital Account in USD Billion
B. Capital Account Earnings Spendings
1. Merchandise Imports 502.34
2. Merchandise Exports 306.58
BALANCE OF TRADE -195.66
3. Invisibles 107.49
a. Software’s export less import 64.92
b. Private transfers less income
outflow
42.89
TOTAL CURRENT ACCOUNT DEFICIT -88.16
A. Current Account Earnings Spendings
1. FDI 19.82
2. FII 26.89
3. Commercial Borrowings 8.49
4. External Assistance 0.98
5. Suupliers Credits 21.66
6. Banking Capital 16.57
7. Capital outflow 5.05
8. Foreign Exchange Reserves 3.83
9. Errors and Ommisions 2.69
NET CAPITAL ACCOUNT 88.16

Low Investments
Our investments were recorded at approx. 29% of our gross domestic product which is lowest in
7 years. It is time to bring cash rich public sector units to fast track and scheduled plans so as
to work proactively in contributing to the ever increasing demand also a comprehensive switch
from subsidy to investment should be made but the government for the people also increase in
expenditure in roads, communications, health services will create that much needed feel good
factor for the citizens of India.
India: Foreign Exchange Reserves
Ever increasing budget on Defence
Though the issue is political but very much in sync with Indian economy. Major
investment/expenditure is done to safe guard Kashmir from infiltration from across border. The
major hurdle in development of any economy is disruption in peace and tranquillity among the
citizens and foreign powers are working to keep dismantling the peace and tranquillity of the
northern state of India. As we keep on increasing our budget on defence and minimal increase
in budget for rural upliftment and education brings a big surprise. It is high time we resolve
this issue and on personal front. I strongly believe once this issue get resolved it will act as a
catalyst in development of India as a whole
High Inflation and Rupee Depreciation
As announced by international monetary fund, chief, Christine Lagarde that world will face
double dip recession and in fact it happened as well shows effect of inflation a de valuation of
rupee. Inflation positioned at 7.23 percent and still rising is still above comfort level of common
citizen of India. Few active measures which can be incorporated can be inject foreign
investment via foreign institutional investors, foreign direct investment, also APMC act should
be abolished. Coupled with 20 percent drop in rupee against dollar since early 2011 is the main
reason why imports got dearer over exports consequently spurring up imbalance in balance of
payments and fiscal deficit.
14370.8
14177.5 14304.3
13934.8
14304.3 14178
14760.7
15102
15551
16275.3
15309.8
16138.4
12500
13000
13500
14000
14500
15000
15500
16000
16500
India Foreign Exchange Reserves in USD Millions

India : Industrial Production
The Key: Sense of Belongingness
The hidden vigour in every Indian. The reason why a migrant to western country feels twice
while returning to India is there is lack of sense of belongingness towards our mother land i.e.
INDIA. People work individually rather need of the hour is to work collectively. A commuter
availing public transport system in west feels it is his/her responsibility to pay for the service
before he/she actually avails the same; on the contrary we are opposite. There ought to be a
change in mindset of each and every Indian to imbibe sense of belongingness towards your
mother nation. All policy reforms shall go for a toss if we fail to inculcate sense of belongingness.
Today we are thriving in uncertainty with respect to economic conditions prevailing in the
country. Until very recently we all cherished equity market touching 21000 mark and had a
perception of endless prosperity in India and of Indians, but dramatic down turn in America.
In 2007 created grey clouds to hover over the globe which caused cloud burst in many
economies, which created much hue and cry and drowned many economies. Together we will
make a change
"So far as I am able to judge, nothing has been left undone, either by man or nature, to make
India the most extraordinary country that the sun visits on his rounds. Nothing seems to have
been forgotten, nothing overlooked."
- Mark Twain, from following the equator
As it is said, it is said you have not visited India, if you do not get astonished by its diversity
.no-where on earth we see such diverse, creative burst of religions, beliefs, dialects, people,
customs, traditions, languages. Indians have the zeal in them to combine and show their mettle
to the world that world's largest democracy is on a roadmap of being one of world's super power
and INDIYEAHHH will achieve this very soon.
-0.5
2.48
0.63
3.51
1.46
-2.58
-1.86
2.6
0.43
2.76
-1.6
-1.4
-3
-2
-1
0
1
2
3
4
Industrial Production

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